Union Minister Amit Shah urged urban cooperative banks (UCBs) to adopt a 'different viewpoint' toward the Reserve Bank of India (RBI), emphasizing that the central bank has 'proactively helped' the sector in recent times. Speaking at the inauguration of a new office building of the National Urban Cooperative Finance and Development Corporation (NUCFDC) at the BSE, Shah told executives from over 1,400 UCBs and other stakeholders that 'we have to come out of it.' According to reports from The Hindu BusinessLine and Business Standard, Shah highlighted his five years' experience as Union Cooperatives Minister, noting that 'whenever we have put a step forward with confidence, RBI has proactively helped us.'
The RBI has implemented several key relaxations to support the UCB sector, as detailed by Shah during his address. According to The Hindu BusinessLine and Business Standard, the central bank has liberalised branch opening, allowed UCBs to offer doorstep banking, made it possible for them to issue demand drafts and life certificates, and appointed a dedicated nodal officer specifically to oversee the affairs of UCBs with over ₹6 lakh crore of deposits. Shah also welcomed the raising of limits on gold loans and permitting one-time settlements for UCBs, noting that 'a lot of aspects have been resolved with the help of the RBI.' In a significant development, RBI Governor Sanjay Malhotra announced a move forward on the 'on-tap' licensing of UCBs in the latest bi-monthly policy review, ending a two-decades long pause in the matter. This move addresses past concerns about lax governance practices at UCBs, which are perceived to be controlled by political heavyweights, leading to instances of some lenders going down.
Recalling his experience of chairing a UCB in Gujarat, Shah emphasized that smaller loans enhance asset quality, stating that 'smaller the loan, better is the asset quality for banks as small borrowers are honest.' Citing his own experience, Shah said when he decided to introduce a ₹2.50 lakh loan without collateral and guarantee in his bank (Ahmedabad District Co-operative Bank), the CEO, who was a veteran banker, was skeptical about this scheme. The CEO alleged that the Chairman approved the scheme to further his political agenda, and it will become a 'loan mela'. However, Shah revealed that the default rate in this scheme is only 0.22 per cent, meaning 99.78 per cent of the loans have been returned with interest. He also announced that NUCFDC will soon be moving its head office to Maharashtra from New Delhi, noting that 449 of such lenders are in the state and 70% of the entities are from Maharashtra, Gujarat, Goa and Karnataka.
Shah announced that NUCFDC, which works as an umbrella body for the sector, has only 690 members as of now, urging the management to lower membership fees and ensure that all 1,400 UCBs avail the membership. According to The Hindu BusinessLine and Business Standard, he highlighted that a lot of advantages will accrue to a lender by joining a grouping like NUCFDC, noting that the umbrella organisation can provide technical know-how, help with compliances, and offer the best in cyber security solutions. Shah also pointed to the Amul experience of how a string of cooperatives can come together to create a brand with a ₹1.25 lakh crore turnover, emphasizing that if India has to become a developed nation as aspired, UCBs will play an important role by supporting the sole proprietors or entrepreneurs in the economy. He added that a security operations centre has also been opened as part of the efforts, and urged the UCBs to join that as well to deepen the depositors' faith.
